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The Kudlow Report

News/Business. Larry Kudlow.

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Greece 11, U.s. 9, Dan 6, Lyle 5, Dan Mitchell 5, Ben Bernanke 5, Us 5, Dan Fitzpatrick 5, Mark Walsh 5, Obama 5, David Goodfriend 4, Obama Administration 3, Southern Europe 3, Washington 3, Portugal 3, Ireland 3, Spain 3, Bernanke 2, Walsh 2, Hampton Pearson 2,
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  CNBC    The Kudlow Report    News/Business. Larry Kudlow.  

    February 8, 2010
    7:00 - 8:00pm EST  

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tonight on the can tud low kudlow report, stocks and bonds are revolting and now it's all about high investment corporate grade bonds here's in the u.s. right or wrong, people are losing confidence in the recovery scenario and what are the g-7 finance ministers say this weekend? more government spending. can you believe it? exactly what's gotten into this problem and not a single supply-side tax cut anywhere on
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the globe. and then helicopter ben bernanke is going to capitol hill this week with a new blueprint for tighter money known as "paying interest on excess bank reserves." i don't buy it but we'll debate it. and finally, the obama jobs plan which i call stimulus 2.0, full of gimmicks and high tax-job destroyers. i'll use my best right hook against the left jabs of mark walsh and david goodfriend two of my favorite liberal pals. fasten your seatbelts, everybody. "the kudlow report" begins right now. good evening. i'm larry kudlow and welcome back where we believe freed market capitalism is the best path to prosperity. let's begin with tonight's money politics message. i'm trying hard to be optimistic about economic recovery in america and for that matter, around the world.
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in my world, optimism always beats pessimism every time. despite wayward policies from washington i still believe in the cyclical recovery scenario here at home. but the growing debt problem in the u.s., europe and elsewhere is starting to sack confidence in the optimistic growth scenario and i have to keep my eyes opened. here's my thought. sovereign debt default legitimators out of southern europe are spreading to emerging market around the world and corporate bond risk questions right here at home. it's contagious. the big shot in the g-7 finance ministers meet in some god forsaken place in northern canada and what do they do? more government spending! can you believe it? that was their pledge. no supply-side tax cuts that might generate growth. that was resolve the debt. more spending. i've never seen anything like it. the problem isn't just debt. the problem is underneath the debt the no tax rate incentives to promote economic growth that
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would dissolve the debt. european central bank head says that everything's going to be fine and, by the way, he says, greece is going to get its debt to gdp ratio down to 3% in two years. what is he smoking? it's now over 13%. the government unions in greece are demonstrating in the streets to stop budget cuts. look at today's 100-point stock market drop and you can see that the investor revolt continues. it is a revolt against big government spending and borrowing. all of which may ultimately, to much higher tax rates, if it isn't stopped. but "stop" is a word that no one seems to understand. again, i want to emphasize the financial revolt against these spend and borrow and tax policies. they are like financial vigilantes. there's, however, an optimistic way out and it's so simple. smaller government, stricter spending limits and lower, flatter tax rates to promote
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economic growth incentives. i don't know how this is to hard. it's the one thing can g-7 or the u.s. has not yet tried. why not, folks, instead of relying on government, give it to free enterprise inteprenurs and they are the way to create jobs and growth. that's the only tried and true growth solution. now, tonight we'll talk about the debt revolt. it is topic number one. and we'll take a look at ben bernanke's rather dubious new-fangled exit strategy which is called "paying interest on excess bank reserves on deposit at the fed." we'll cut to that in a minute. and we'll skate through the new washington so-called "jobs plan" which i think is more gimmicks and more spending and, by the way, more tax hikes than you can shake a stick at including tax hikes on the very investors who are the most likely to invest and create jobs. but with all that, let's get to the top story this evening.
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that's the global revolt against debt. here now we have dan mitchell, senior fellow from cato. and the senior currency strategyist at bank of new york melon. and dan fitzpatrick of stock market mentor.com. michael, i'll start with you. i don't usually like to obsess about debt because i think economic growth dissolves debt. the way i see it, we're spending and borrowing and there's no supply-side tax relief in sight to promote the growth that might help us out of the debt mix. this thing, you tell me. it looks like it's spreading from sovereign debt to risk in southern europe to corporate bonds here in the states. and emerging market bonds around the world. what's up with this? >> larry, certainly there's some contagious effect here. but this has been a long time in the making. going back to u.s. thanksgiving, there were a number of events. the dubai world debt
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announcement. and what began as an early closing out of year-end trades led to speculative selling which led to early this year, some very serious concerns about debt defaults. if this situation in greece had emerged six months ago i think that it would have likely been looked over. right now, market sent pmt has shifted. it's a very real problem which has a solution. and the solution is clearly for the eu to step forward and say it's willing to underwrite the debt default risk of greeks. >> but, dan mitchell, okay. i'm sure that greece may need some help, dan. but on the other hand, i want to come back to the point that's troubling me so much. as i read the headlines over the weekend from the finance ministers way up in northern canada or wherever they are, they want to spend more. that's the real headline, dan. isn't that exactly what the problem is?
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>> that's how we got in this mess. watching the g-7 summit is sort of like expecting heroin addicts to stop giving away free needles. deficits and debt are not normally a problem. what we want to focus on is what's behind it and that's the growing burden of government spending. that's what got greece in trouble and that's what's got spain and portugal in trouble. ireland used to be a good story but government spending has been growing hand over fist and we're following the path and all the politicians of the g-7, people like geithner and the people from the uk, government spending has explode to more than 10% of gdp in the last ten years. these are the guys causing the problems and they're not going to give us solutions. >> dan mitchell, you cover the international fiscal and especially the international tax piece. before i get to dan let me ask you this. in the 1990s after the fall of the berlin wall and the end of soviet communism and in the
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early 2000s as i recall, a lot of the emerging countries moved to lower tax rates, flatter tax rates and limited government, following essentially the free market supply-side model. you tell me, i don't hear or see a single example of that coming out of the world financial crisis. >> the good news -- let me start with good news. the flat tax countries of eastern europe still have flat taxes, not withstanding the pressure from the oecd and the european commission as they try to get the taxes to high levels. the bad news a lot of these countries during the strong growth period earlier in the decade were spending too puch. it's really only slovakia that's a success story in terms of a country that's controlled the size of government. and higher tax rates in ireland and the united kingdom. so it's like a dog chasing its tail going to a downward spiral of bigger government, higher taxes and more debt.
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>> dan fitzpatrick, one thing that bothers me in looking at today's market activity is the fact that the debt default worries from southern europe seem to be affecting and impacting corporate credit here in the u.s. it's not a massive change but the spreads, the so-called "corporate risk spreads" the highest yielding so-called junk bonds but mayor more importantly, the investment grade corporate bonds, stuff that's been hot as a pistol in price terms, now widening. and it looks like it's impact penguin stock market. how do you read this? are people losing confidence in the recovery scenario? and when will the stock market stop falling? we're now six or seven weeks down? >> i think it is a crisis of confidence, frankly. we're seeing so much arrogance from our so-called "financial leaders" that they don't really -- all they're doing is the same thing that seemed to work so well back in the '90s which is raise taxes and it's all good.
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but that was internet, window computers and we don't have that stuff now to stimulate the economy. what i think we're getting a little bit of a cockroach theory with greece. all these other countries now showing they're having such massive problems, you kind of look around and say -- i think it's just limited to that. there seems to be this flight to cash -- >> but there's still growth. i mean, profits are coming in very good. there's a myriad of economic indicators including the isms. the jobs' report was sort of -- i acknowledge that's the achilles heel. dan, are you losing confidence in the economic recovery scenario here in the uss? are you losing confidence in it? >> yes, i am. i think ultimately all this debt we're taking on, the problem with debt is you got to pay the darn stuff back. ultimately that will result in taxes and you've been talking about this since the top of the show. you have to keep the money in the hands of the private
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entrepreneurs and we're doing opposite on a global scale, it seems. until we stop doing that we're flirting with the definition of insanity here. so i think we've got a little bit of a sealing on this economic recovery. i see it flat to down. >> michael, let me ask you this. there seems to be a financial investor revolt against the debt and government spending. i want to ask you whether you take that seriously. occurrence sis are selling off. bonds are selling off, stocks are selling off. are governments listening? >> i think this is a good problem to have. 12 months ago we were worried about the global economy and the u.s. was slipping into a depression. certainly, we had to pay the price an the price has been dear. the asset price bubble concern was really one of the top concerns at the end of last year. i think that's on anyone's radar screen just now. and we need to pay this debt back. investors do care.
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but sentiment place such a significant role, larry, in terms of foreign exchange. in terms of all the global financial markets and what we've seen here is that where back in early fourth quarter, we would buy equities and high-yielding assets on good information, good news and we would ignore the bad news. >> but look at -- let me ask you and go directly to the currency since you're the specialist. how far down will the euro fall? because here's where i'm going. i am concerned that the european debt-default risk which is rising, southern europe, maybe not just southern europe -- that translates into a weaker and weaker euro. that didn't happen today but it drives the dollar up. but the high dollar is a deflation they're in event.
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>> that's a strong relationship between the stock market and the dollar. i think that the link between them is risk appetite when risk appetite is on, you're buying equities and other high yielders. and you're borrowing u.s. dollars to do that because a very low interest rates in the u.s. and in japan you can borrow and lend overseas in nonu.s. and non-u.s. terms. what you're really looking at for 2010 is a situation where the dollar could -- the market could move in favor of the dollar just out of a flight to safety. >> right. >> much like what we saw with the lehman crisis. >> but that could be damaging for the growth outlook. that's what concerns me. you're going to squash prices. you have this unexpected ripple of deflation developing from this whole story and i think that's a problem. >> that is a problem given the fact we're already at zero
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inflation, essentially. and there were deflation concerns not long ago and this could prompt renewed concern in that area. >> dan fitzpatrick let me ask you something about stock market investment strategy now, even though it's mundane. it seems like since the bank tax and the so-called "volcker plan with this which is like a second bank tax limiting the profits and loans, the market has gone straight down. how far down do you think it will go and how are you going to play this inning? >> i think the s&p probably has a floor on it of about a thousand. that's what i'm looking at. it seems like a long way down but i mentioned that a couple weeks ago and it seemed even parteder down. i really see that as the next level of natural buying. like the dow at 10,000 on the way up and down you need a velcro on that dow 10,000 cap to point one way or another. so i think we have further
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downside to go. ultimately, i think technology leads but i wouldn't be stepping in front of it right now. look at ibm was very weak today. a lot of these tech leaders i think you can get them cheaper later. but you definitely want to buy them. >> dan, from your international fiscal knowledge, let me go back to this point, portugal, spain, greece, italy, ireland, et cetera, i don't know we don't throw germany and france in there. i don't see them doing anything to limit spending and lower tax rates. and the united states continues to run a greece-like fiscal policy. dan, are there any nuggets of hope that in europe, at least, they might revert back to supply-side policies? >> i think the key thing you need to watch for is whether they bail out greece. if they bail out greece, that's going to send a signal to portugal, spain, italy and the rest -- you don't need to have any fiscal discipline.
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i think that would be a huge mistake on the part of the other european countries tore european central sfwhooing let me interrupt. that bailout of greece which you say would send a negative signal is what a lot of people on wall street may be foolishly hoping for and that can set us up for greater market disappointments. you're saying bail out, that keeps them afloat? no real fundamental policy change? is that your argument? >> if you're only going to live for more months, vote for a bailout of greece. but in the longrun it will send such a terrible signal to the other european economies overspending, overtaxes and overborrowing that you'll have a disaster. we're only looking for common sense. you don't have to pay back debt. just stop the debt from growing faster than the underlying economy. >> but that requires economic growth policies which -- here's what i don't get. we have reverted back to this 1935 business that government spending -- which is really a
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peck form of kensianism. why do they have such blinders on? that's my question. there's an optimistic way and there's a growth and private enterprise way. lower tax rate with spending limits, dan. wouldn't that be better? all these people are singing from the same but the wrong hymn. >> but if you're barack obama or gordon brown or the greek political leader you buy votes by taking money from the productive sector of the economy and then allocating it to the public employee unions and other special interest groups that are sticking their snouts in there. it's not their snouts. it's like a swimming pool but it's really a mess. >> how far will the euro go down? >> another 10 to 15% here in a
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true crisis situation. it would have at the margin, some inflationary -- deflation their impact. so 125 is the limit for the euro dollar in the next three to four months. if risk aversion subsides we're back mid year around the 1.42 area. then if and when the fed starts removing monetary accommodation, rate normalization, we think by the end of the year we could be back toward about 1.28 area. >> i'll tell you this. on the way out, i'm a hawk. i want price stability. i like currency stability. i like king dollar. right now with the euro hemorrhaging and the dollar rising as a consequence, it's not the strong dollar, it's the weak euro as you point out. i'll tell you, this is no time for the fed to tighten because that will inhasn't the deflation. and dan fitzpatrick, that could knock stocks down another 5,000 points. i want them to shrink their
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balance sheet but this is not the time. we'll have a fad conversation. right now stuff is too weird. dan mitchell has the right idea. dan mitchell, thanks a million. michael and dan fitzpatrick. coming up, we'll talk about the fed story. fed head bernanke heads to capitol hill with a blueprint for tighter monday policy called "raising interest on excess bank reserves." this one troubles me, too. what really troubles me is whether the fed will make a huge mistake in this atmosphere of deflation and debt default risk. you're watching cnbc, first in business worldwide. a lot of things could go wrong here and i'm never going to lose my optimism, but color me worried. my eyes are opened!
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. if european debt defleegs risk isn't enough, ben bernanke goes up to capitol hill this week and allegedly he has a new blueprint for tighter money.
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the so-called exit strategy paying interest on excess bank reserves. is that the best way to lower fed's bloated balance sheet? i don't know. let's hear from the former fed governor and senior economic adviser with the potomac research group and peter navarro, university of california at irvine. peter, before we get to this fed interest on excess reserves business, i want to ask you, with the dollar rising because the euro is hemorrhaging, what is the appropriate monetary policy? in a perfect world, what would ben bernanke, what should he do? >> well, i think i'm going to disagree with you, larry with you i think it's time to recognize the easy money strategies isn't working. it hadn't stimulated business investment. all it's done is spawn a carry trade and asset bubble and also, that bernanke, beggar thy money
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weakness. he shrinks the balance sheet which would raise short-term interest rates. he tells basically, the treasury department and obama administration, he's not going to accommodate the massive deficits which are just killers, but that will raise long-term interest rates and here's the punchline, larry. this is a three-move thing. the third thing that bernanke does is he signals very, very strongly the obama administration and congress, we ain't getting out of the problem unless we have a massive business tax cut because in order to offset what we need for sound money and higher interest rates, to get them back to where they are, more than offset is a massive business tax cut. cut marginal tax rates dramatically, you 100% expenses and r & d depreciation. there's only four things that drive growth. consumption, consumers out of
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bullets. it's government spending we know it doesn't create jobs only debt. and it's exports, and that's not working when europe is weakening. the only thing left to drive us is business investment. the only way to get business investment going is through tax cuts. >> where do i sign up? i like it very much. you heard peter. lower business tax rates across the board. i presume that means large and small corporations, full cash expensing for business investing. that's what the ceo of. fedex wrote and bring fed's balance sheet down. while we'll look at the picture of the st. louis monetary base on the full screen so folks can see how baud and wide it is. from $800 billion to $2 trillion. what's your take? >> even if the tax cuts were the right thing bernanke won't recommend that to congress. he's been very careful not to make any fiscal policy
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recommendations to the congress other than to get the deficit down and i think he'll tell the congress the med has no intention of monetizing the debt. it's going to follow the policy necessary to maintain price stability. >> let me ask you this. this is really important. you say bernanke has no discussion with congress about fiscal policy, yet his accommodating the federal deficit by buying treasury bonds and he's going to be doing that in the future but de facto default. he's accommodating a bad fiscal policy. if he were smart, in order for his agency to work he has to tell congress, hey, cut business taxes fonl thing that can grow and create jobs are the business sector. why doesn't that work? >> he's not going to tell them that. >> hang on, go ahead. >> he doesn't make recommendations of that kind to the congress. what he's going to tell the congress is that we're not going to monetize the debt. they don't have to monetize the
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debt. if you don't monday taze the debt you get high real interest rates. >> he's unbelievable. -- that's not believable, lyle, when he says nobody believes that helicopter ben, ultraeasy ben and the cousin of easy alan greenspan will not monetize the debt. everybody believes he is. that's why the bond vigilantes are going crazy right now. >> i don't see the bond vigilantes going crazy when the ten-yield yield is about 3.5%. >> but it's going up. >> lyle, let me bring you in as a former federal reserve governor and longtime analyst. this idea of paying interest to the banks for their excess reserve, i have some problems with that. they're paying interest above the rate by 25 basis points. bank aren't really in the business of buying and selling fed funds. they're in the business of making business loans. so why not pay interest if you're going to do it, above the business loan rate, was now 3% -- you probably have to be
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150 basis points or alternatively why not shrink the balance sheet told fashioned way and sell the bonds? >> one of the old fashioned ways, the most uniform method of reducing the size of the balance sheet before was to sell short-term securities. they don't have any of those anymore. they have to find other methods. i kind of think they're going to shrink the balance sheet before they begin to raise interest rates using things like reverse repos, and offering term deposits to banks to concert excess reserves into deposits at the fed that can't be used for the moment. >> but that will rouse interest rates. >> let me ask this in so far as sometime concerned, now is not the time. lyle, what do you think? when is the time? >> my judgment is this is going to be quite a moderate recovery. we'll have high unemployment for a long period of time and the
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fed probably won't have to raise interest rates until the beginning of 2011 but it depends on how the economy works out. if we had 5.7 growth in gdp for another quarter the fed will short before that but i think that's going to happen. >> peter, what's your take on this? paying interest on excess reserves? that's like giving me more interest so i put my money in the bank and can't spend the money. that's kind of what they're doing. they're saying, gives your excess monday, we'll pay higher interest rates and won't make loans. everybody wants to make loans. i guess the fed doesn't. what's your take on this? >> it's basically a backdoor way of raising the rate. you'll see short-term interest rates creep up with the program. it's basically a rate hike. i agree with you. do it the old fashioned way and get rid of the stuff on the balance sheet and that will spike interest rates and we get back to the box that ben
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bernanke's in. the other thing here, larry, i think is worth pointing out, a couple of things here, like this stock market. i believe firmly that the stock market is a leading indicator of the economy and what we've had since october now, basically, a sideway's pattern. beginning in october we had a slight rise up until some weeks ago and then a fall but if you look at it as the chart it's sideways pt that's uncertainty about whether or not we'll have a 5% gdp or a double-dip recession. that's what the market is reflecting, i think. and what we have to do from a policy standpoint is provide market participants some kind of hope that washington understands what ecreates jobs and you said on this program over and over, everything they do is an exactly wrong direction from raising taxes to tax and spend. it's insanity. it's nuts! >> lyle, let me ask you this. it may be subtle but it's
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important. right now in the whole narrative you have this collapsing euro because of the threat of sovereign debt defaults over there. and the dollar is climbing. i'm not smart enough to know if the dollar is going to keep climbing. we had a currency expert on in the earlier segment and he said the dollar will climb all the way to 1.25 euros. would this be the right time for the fed to tighten up in any way, whether it's higher interest rates on reserves or shrinking the balance sheet or selling bonds? remember, you know the fed will stop buying mortgage-backed security next month. that's in some sense a little bit of a tightening. but i'm worried about a whiff of deflation that the fed could pile on to. >> i don't worry about deflation but i think you're right. there's a lot of negatives the fed has to keep in mind. increase in the value of the dollars is one of them we have pretty strong world growth up to this point and exports are doing
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very well at the moment. but this could slow it down so i think the fed has to be careful and not tighten up too fast. that's another reason why i think we'll be looking at low short-term interest rates until probably early next year. >> i think stocks, peter, i think stocks are very concerned about fed policy for a lot of reasons. and i'll tell you this, i'm for a steady dollar and i love your low-tax rate scenario but in the absence of either, i'm worried about the federal deserve. >> fed's pivotal in this and i think the signal about not accommodating the federal deficit, this would tell the obama administration that they can't basically use a government spending and higher taxes on businesses as strategy. >> he needs to say that. you are right. >> he's the guy. >> he's the smartest guy in the room there but he's basically
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been fighting the great depression battle and he needs to like have an epiphany about what drives an economy and has to realize that his business investment, larry, in the private sector. >> larry? >> yes, lyle. >> ben has already said on more than one occasion the fed won't monetize the debt. maybe he needs to say it louder or again but the fed has told us in no uncertain terms they're not going down that path. >> gentlemen, thank you very much. great discussion. a note for tomorrow morning, be sure to catch the president's top man on the economy, larry summers, that's tomorrow on "squawk on the street" at 9:00 a.m. eastern. coming up tonight on "the kudlow report." neither slow nor sleet nor the dark of night keeps president obama from plowing ahead with his government agenda. we have the full report coming up after the break. stay with us. uncertainty about debt. uncertainty about the fed. it's a sticky situation. (announcer) if you want directions to the stadium, push here.
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the blizzard in d.c. shut down congress today but the president is moving ahead with his big government agenda. is he not? >> hampton pearson will give us the details. good evening. >> good evening. my faith and knee market capitalism and bipartisanship was restored just before halftime of the super bowl yesterday when we had that moment with letterman, oprah and leno, sharing the same couch and shocking the world. and it wasn't as dramatic as the
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new orleans saints onsidekick with you but when president obama used the pregame interview to talk about his bipartisan health plan, it caught everybody offguard. but ve to wait and see. the president strives to reposition his agenda starts with jobs. the senate could act on a bipartisan joobs' bill this week. key features, tax breaks for businesses that hire unemployed workers. extending unemployment benefits and renewal of a jobless subsidy for health insurance. critics against using t.a.r.p. money to pay for it all may have a tough time explaining voting against the jobs' bill in an election year. obama's first time move to jump start health care with now the democrats no longer have a filibuster proof senate majority, inviting republican and senate leader to a televieds health care summit on february 26th. house and gop leaders stick to
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their call for obama and democrats to shelf the health care bills in their entirety and the president says he has no plans to do so. stay tuned. starting tomorrow, weather permitting. larry? >> weather per mirting, hampton. let me ask you this. is there any sense of what the republican position will be? in the prior segment, peter navarro talked about some things like lower tax rates on businesses across the board. stop the bush tax hikes, the bush tax cuts from expiring. in other words, will the gop come out with their own jobs' bill? >> i'm not sure about that. but you do get to the nub of what office talking about. you have the democrats essentially saying, if nothingeling, we're going to force republicans to vote up and down on a jobs' bill while unemployment is still hovering around 10%. >> all right. hampton pearson. i thank you. coming up, are obama's tiny temporary tax credits for small businesses and huge tax
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increases for the investor class going to kill any chance for sustained recovery? well, we have a special treat tonight. i am steps into the rink with my very favorite left-jabbing liberals. mark walsh and david goodfriend. a whole new format. at the end of the segment they'll need reinforcemented and three and four people to come at me. keep it with "the kudlow report." left jab, right jab, when we come back. 
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will obama's so-called "jobs' bill" actually kill jobs? that's my biggest worry. will the obama tax attack ruin any chance of tax recovery? let's rumble. two of my favorite liberal friends, the co-hosts of the serious radio show "left jab." that being mark walsh and david goodfriend. i want to say up front they'll need more than two of them to take me on but we'll let them start with two. who's beginning? which one of you wants to step into the ring? >> right here. conservatives love to say if we could cut taxes across the board the economy would boom and deficits would go away. if you ask real live business
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people they'll tell you, not so. the three best things for business would be jobs, jobs and jobs, fueled by real demand job growth would be the greater consumption for businesses across the country. before you start calling for across the board tax cuts that would blow an even bigger hole in the federal deficit weakening your and our beloved dollar further, consider this. tax policy alone not get us out of the recession. what we need right now is for banks to get often sidelines and provide operating lines of credit to businesses. >> start taxing them more. that's a weak -- mark walsh, you got to do better. you got to have a better argument otherwise you guys are in trouble. >> round two. the issue is the cost of capital. interest rates are at historic lows. bank's uncertainty about the future is making them cut down or shut back lending. the obama administration wants to infuse $30 billion into small business loans is a step in the right direction. but if you think tax cuts must be a part of any recovery package let's do something for
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all businesses. across the board taxes are misguided. targeted incentives work. we saw how a refundable business tax credit got businesses investing better and more efficient energy. for a business ready to hire but not sure whether this is the time, a hiring tax benefit could be just the thing to give the business the thing it needs to make that decision with knowledge. it calls for increasing jobs and jobs' tax benefits for business. that's your left jab. >> i can't believe we gave you all this time. all i'll say is this. you're right about the cost of capital. what you're mixing is the tax cost of capital. if you look at what fred smith of fedex said, give them zero depreciation expense, lower the business tax rates, go right to it. can i tell you this? this little tax credit thing is a jimmy carter gimmick. it didn't work then and it won't work now. it's the equivalent of "cash for clunkers." it gives a one time payroll tax
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to hire for one year and then you toss them overboard after that. that's the problem with tax credits and targeted and temporary and teeny tax credits. you want permanent lower march in tax rates. i agree with you. apart from leafing the bush tax cuts alone, we should go to business right now. but not this way this way is the wrong way. it's been tried before, tax credits, small tax credits. >> larry, talk about tried before -- >> we're going to stop. >> i was just getting warmed up. >> tell me why raising taxes on banks and big companies and upper class successful entrepreneurs. i can't wait to hear it. if you want to go to your cell phone for reinforcement, nous the time to do it. coming up, round two of left jab. if these two can't land a punch,
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who can?
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welcome back. our new special, two liberals versus me. we have the co-host of the
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cirrus radio show, "left jab." david, i'll go to you. you have to explain to me this jobs' bill is raising taxes almost across the board on the job creators. and i want to walk through the with you. capital gains tax goes up so the dividend tax goes up. inheritance tax goes up. then the bank tax goes up and an then the tax on foreign corporate earnings goes up. that's just starters. those are exactly the sectors and people in the economy that will create jobs if you quit penalizing them. all you people on the left love this class warfare stuff. class warfare doesn't create jobs. incentives create jobs. >> absolutely. we love business. our point to you is, when you keep handing the store over to the folks individuals, not corporations now, individuals at the highest end of the tax bracket. >> who make the money, the most money -- >> and you said it on the show before. corporations don't pay taxes. individuals pay taxes.
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>> 40%. the top tier pays 40% of the taxes and you want them to pay more? if you live in new york city it's 55 to 60%? how much more do you want? >> you can't complain about the weakening dollar due to deficits and look us in the eye and say, tax cuts will solve everything. give businesses the incentive to invest. >> once upon a time there was my time of democratic administration under bill clinton who lowered the capital gains tax rate and the economy grew by topsy an it through off revenues. we had an extraordinary growth evaluation. >> and the reagan, the same thing. >> the deficits ballooned in the
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'80s. >> but deficits fell off the reagan tax cuts were fully implemented. >> wait a minute. economic growth did solves debt. you got to focus on growth incentives, gentlemen. and i want to bring you over to the right side -- >> to the bright side. to the light side. >> if you, mark walsh, make a great entrepreneurial investments. >> right. >> if you make a investment that is more profitable for you you'll seek out those profits. under the obama tax plan, the higher tax rate on capital gains dividends, estates and top incomes make it less profitable for you to invest. that tells me jobs will be destroyed and not create them. >> but you're looking at individual day-to-day decisions and the kinds of things which defend that you're concluding what tax cuts are all about. i would take it up a level. entrepreneurs wants a stable nation that knows where it's going and knows how to fund
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itself. our expenses and costs are way above our, the revenues. we have to match cost to revenue. >> i didn't make all this spending. that's your crowd. it's your crowd -- i'm going to give you credit for the entire g-7 that talked about that. their discretionary spending and you guys want to raise tax rates? >> we have to. >> look at what happened. you had the best supply side in history. george w. bush and he made the mess we're trying to dig out from now. deficits and deregulation and the collapse of the financial sector and -- >> the bush tax cuts -- >> you're you're going to defend the bush tax cuts? >> from the obama budget, the bush tax cuts on high-income earners are estimates at $34 billion in 2011. that's in the obama budget. that's what you're talking about. that's silly. the capital gains tax rate is supposed to lose money every
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time tloer capital gains tax rate it makes money. the entire bush tax cut was worth $2.6 trillion over ten years. this is the obama numbers. that proves that it wasn't just upper income people that got the bush tax cuts. in fact, the top rate, $345 billion over ten years. you see what i'm say something. >> there were three. first one applied to a much -- >> but for today's budget deficit you miss the point. you know what, mark walsh, i got to tell you. i don't care about deficits and debt if we're in a growth mode. i want to tell you -- >> because why? because growth will take care of deficits? >> it will. growth and a smaller government, yes. but i'm saying, right now the problem with the long term estimates there's no growth. its true in the u.s. and around the world. why don't you on the left of center, even try what john f. kennedy did and ronald reagan and bill clinton, which was to reduce marginal tax rates? the very people who are likeliest to invest will invest
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if it is more profitable to do so. >> if individual tax rates go down on wealthy people that doesn't job growth. that's my assertion. >> they're not the investors. you're only taking a very small sector like me. if i had another 20% of tax money coming back in my pocket and i could troe "x" more dollars into my account. >> you could build more houses and employ 45 more people. but to you -- >> bring it, larry, come on. >> they say we're out of time. but i just love this. >> we still love you. you're the best. >> they are both great. they'll have to bring some of their friends next time. incentives matter. how many times do i have to say that. coming up, my "last word."
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♪ well, look who's here. it's ellen. hey, mayor white. how you doing? great. come on in. would you like to see our new police department? yeah, all right. this way. and here it is. completely networked. so, anything happening, suz? she's all good. oh, my gosh. is that my car? [ whirring ] [ female announcer ] the new community. see it. live it. share it. on the human network. cisco.
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once again i'd say to my very good friends, mark walsh and david goodfriend, and they're both in business and terrific people, if it is more profitable to invest after tax people will do so. it's the most basic incentive in the free market economic capitalist scenario. after tax, more profits, you're going to get more investment. that's why raising tax rates on the top people is just nuts. catch me tomorrow morning on "the call."
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